NEW DELHI & SINGAPORE--(BUSINESS WIRE)--New investor classes and alternative financing will drive the expansion
of the distribution generation (DG) market, adding further challenges to
the traditional utility business model, according to a new Fitch Ratings
report.

Fitch expects third-party finance and alternative capital sources to
play an important role in expanding the market for residential solar DG.
Greater access to capital will make enable easier residential
photovoltaic (PV) acquisition, reduce upfront cash outlays, eliminate
homeowner system maintenance and upkeep costs, and thus broaden the
potential customer pool. Third-party finance has not resulted in lower
rooftop system acquisition costs and the U.S. Department of Energy
estimates in a December 2013 report that third-party finance added
approximately 15% to total system costs.

Third-party ownership currently represents 60% to 70% of total
residential DG installations and remains the key growth driver of DG
installations. Third-party-owned systems, themselves, have been fueled
by the ability to attract new investors and new forms of capital or
recycle capital through securitizations.

Traditional utilities have been the sole distributor of electricity even
in restructured states where generation and retail energy supply may be
provided by others. However, under the leasing model advanced for solar
distributed generation, customers can now purchase electricity - at a
lower price than the utility retail price - from the owners of the
rooftop systems. The leasing model is similar to the retail electricity
model in a restructured state but potentially has more risks for the
incumbent utility, as the volume of utility-supplied electricity is
reduced.

Fitch believes this will further challenge the traditional utility
business model, which is already under siege from energy efficiency and
other market dynamics.

The full report 'Alternative Finance Plugs into Distributed Generation
Growth' is available at 'www.fitchratings.com'
or by clicking on the link.

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